July 14, 2022
2022 will go down in history as the year we coined a new economic term: the streaming recession. Actually, the credit goes to Morgan Stanley, citing the effects of soaring prices and shrinking bank accounts on an expected downturn in streaming subscriptions. Netflix has already felt the pinch, losing over a million subscribers in the first half of 2022 and pondering putting ads on their service for the first time ever in order to offset the losses. And HBO Max has announced both lay-offs and a roll-back in the amount of content they'll provide.
But cutting back on streaming is just one way consumers are dealing with rising prices. People are backing out of big-tickets items like new home and car purchases as ell, and even changing their behavior at the grocery store.
Marketers across all industries are scrambling to keep pace, with many finding themselves in uncharted waters. The inflation we’re currently experiencing is unlike anything the marketplace has seen in over a generation. Which means a whole generation of marketers have never had to grapple with inflation’s impact on their brands. Nor have they ever had their brand equity tested in such a profound way.
As inflation drives up the costs of manufacturing, labor, shipping, and everything in between, companies are driven to pass those increases on to customers in the form of higher prices. But those higher prices can create dramatic changes in the ways even your most loyal customers perceive your brand. For brands that are historically driven by price, that loyalty can be lost all together. Let's take a look at what matters most for marketers charged with protecting brands from the negative effects of inflation.
Brand equity matters.
In a time of rising prices, it’s tempting to focus entirely on price as a trigger for purchase. In reality, though, the more prices go up, the more important brand equity becomes. As it becomes harder to motivate consumers based on cost value, it becomes more necessary to create differentiation. And that lies in brand equity. It represents the intangible benefits of choosing one brand over another. The greater the equity, the better the brand can withstand any price hikes. So if your brand has invested consistently in brand equity, now is the time to start cashing in on it.
Indeed, Netflix is hoping this is the case as they heavily promote exclusive content that you can only find on their service. Want Stranger Things? You still need Netflix.
Staying visible matters.
Much as we learned during the COVID-19 lockdown, brands that go dark in such challenging times are the ones most likely to go away entirely, while more opportunistic brands seek creative ways to engage their customers in ways that are surprising and also relevant. Dominos is one example. This year the brand began a campaign promising to tip customers who pick up their own pizzas rather then having them delivered. The "tip" is in the form of money off a future purchase, but the underlying message is crystal clear: Domino’s will help lower the cost of pizza if you help them lower the cost of doing business. Win-win.
Being nimble matters.
In another recent post on marketing during inflationary periods, we discussed the four ways consumers tend to change their purchase behavior in such times. But a key component of this is the impact over time. As inflation either lingers or worsens, those behaviors could change again. Consumers happy to spend on minute might be more inclined to save the next, while others realize they can't put off important purchases any longer. Understanding not only how your customers behave today, but also how they might behave tomorrow, will help you stay flexible in how you market to them.
Smarter ad buys matter.
As any marketer with a paid media budget knows, inflation has hit that corner of the industry as well. Ad prices are up, while budgets are likely to stagnate, if not shrink. Marketers should respond by prioritizing audiences most likely to buy despite higher prices, and be willing to re-evaluate how they target those audiences. At the same time, a media buy that once mixed in broadcast, terrestrial radio, streaming, and search, may need to eliminate one or more of those channels in order to concentrate budgets around the most important ones. Better to narrow the mix than get spread too thin and render the entire spend ineffective.
Inflationary periods are no fun for consumers or brands, but they're nothing new. Knowing what's at stake, and how consumer needs may shift at such times, will go a long way to ensuring your brand stays healthy long after inflation had been wrestled back under control.